Dollar Surges as Oil Soars and Yields Rise
The US dollar strengthened sharply on Monday, driven by rising US Treasury yields and a surge in oil prices, which rekindled inflation concerns. The dollar's rally approached 1%—its biggest daily rally since mid-May—before paring some of its gains in the afternoon session in New York.
This movement occurred as WTI oil prices surged around 8% on Monday, extending a two-day rally to around 11% amid the risk of disruption to energy shipping routes due to an Iranian war. At the same time, US Treasury yields rose across all tenors as investors believed rising energy costs could complicate the Fed's interest rate cut window.
The Bloomberg Dollar Spot Index briefly rose to around 0.96% in New York morning before weakening slightly in the afternoon. Nearly all G-10 currencies were under pressure, as President Donald Trump declared that Washington would do "whatever it takes" to address Iran's campaign—which added to market concerns about inflation.
The greatest pressure was seen on European currencies. The euro, Swiss franc, and Swedish krona each fell more than 1%. Meanwhile, the Canadian dollar and Australian dollar were relatively resilient due to their exposure to commodities. On the volatility front, implied volatility measures in FX rose, although the JPMorgan volatility index remains below its peaks in February and late January.
Among major pairs, EUR/USD fell around 1.03% to 1.1690, below its 100-day moving average and approaching its 200-day average. AUD/USD weakened to around 0.7080 after a deeper dive to the 0.7033 area.
In Asia, USD/JPY rose to around 157.75, approaching its early February peak, amid Japan's vulnerability, which is heavily dependent on energy imports from the Middle East. In Switzerland, USD/CHF jumped around 1.4% to 0.7798 after the Swiss National Bank stated its readiness to intervene if turmoil from the Iran crisis disrupts the currency market.
Source: Newsmaker.id
